How the Cliffs Natural Resources Inc (NYSE:CLF) Iron Ore Supply Agreement Can Affect Shares

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Cliffs Natural Resources Inc (NYSE:CLF) shares jumped 38.80% to $4.32 on Tuesday following reports that the company will enter a new iron ore supply agreement.

Cliffs Natural Resources Inc (NYSE:CLF) shares are moving in a 52-week range of $1.20 to $5.83, indicating significant momentum to test the top of its range at this point. The company has a market cap of $719.16 million at 181.92 shares outstanding.

On May 31, the company announced that it has entered into a new 10-year commercial agreement to supply Arcelor Mittal USA LLC to with iron ore pellets. This new agreement will replace the existing ones expiring in December this year and January next year. In addition, the new contract establishes minimum tonnage of pellets of 7 million long tons, higher than current minimum level, and includes Arcelor Mittal’s total purchases of iron ore pellets from cliffs up to 10 million long tons.

Cliffs Natural Resources Inc shares are up roughly 94% this year and has nearly tripled year-to-date. Share prices are down 43.04% for the month. Analysts, however, have noted that the latest agreement isn’t exactly a new one and won’t guarantee an entirely new boost to profits.

For Cliffs Natural Resources Inc to really benefit from this deal, what it needs is a combination of higher volumes and stronger iron ore prices. So far, commodities have been on the retreat, following crude oil’s test of the $50/barrel level ahead of the OPEC meetings this week. Iron ore, in particular, has been volatile as it also draws support from demand levels in China. Earlier today, the world’s second largest economy reported no change in its official manufacturing PMI at 50.1 and a drop in its Caixin version to suggest weaker demand for raw materials.

Cliffs Natural Resources Inc is a mining and natural resources company that supplies ron ore pellets to the North American steel industry from its mines and pellet plants located in Michigan and Minnesota. Its segments include US Iron Ore and Asia Pacific Iron Ore.

 

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